Charging expenses to Client. How to deal in Company Accounts for corporation tax

[doodab]

Generally, do you provide a separate invoice for expenses?

Yes, it prevents them from delaying payment of the main invoice by quibbling over expenses.

[malvolio]

The point to remember abut expenses is that they are incurred as part of your delivery of the service to the client and as such are liable to VAT, regardless of whether or not the original bill was VAT exclusive, inclusive or from Norway. Assuming you're UK based, you total up everything you've spent for the client, including your fees, and bill them the total plus 20%.

The argument about VAT on VAT is a nonsense, this is just the agency being stupid. However, if they insist, you can charge the cost less VAT rather than have a fight about it. If you work the sums out you don't actually lose anything, even under flat rate (Although if you have a large VAT element routinely, flat rate is not perhaps the best option)

However what you are not doing is taking off the VAT, you are merely deciding to charge a discounted rate for that element of your service.

[DirtyDog]

I was travelling overseas loads earlier this year..if its for client work ...you convert the total paid into GBP (use post office or similar conversion rate for currency and provide the exchange rate) and add VAT on your invoice. you are working thro a UK company so don't make it more complicated on yourself.

If you have paid by credit card, then check what exchange rate and charges they have applied, and make sure you calculate the invoice correctly. In the grand scheme of things, it may not amount to much, but you may as well have it rather than being out of pocket.

[diesel]

My situation is even more complicated in that I am doing a lot of foreign travel for the client. They pay for the air fares and taxi to/from the airport in the UK but I usually end up paying for the hotel (although they book it.) My accountant advise me to add 20% VAT even though the sales tax rate was a lot lower in the foreign ountry (I found it confusing...!) But a key point is that such expenses are effectively classed as 'cost of goods sold' for my ltd co.

I submit one invoice for my month's fees and include the expenses. The agent has a section on my online timesheet to add expenses which the client must 'approve' as well as my days worked.

No one ever asks for any receipt.

I was travelling overseas loads earlier this year..if its for client work ...you convert the total paid into GBP (use post office or similar conversion rate for currency and provide the exchange rate) and add VAT on your invoice. you are working thro a UK company so don't make it more complicated on yourself.

but you because you add VAT, does not mean agency have to pay...as I am finding out with my agent

[edison]

Bit confused about this. OK, so I travel 20 miles to client site and then 20 miles home. So I pay myself 40 x 45p yeh? Job done.

During the day, client wants me to travel to different site and pays me expenses. Say 20 miles. Assuming they're also willing to pay me 45p a mile (although in the past some ain't been so good).

So, instead, I now pay myself 60 x 45p per mile expenses from company account to myself? i.e. £26.00

Then I bill the client 20 x 45p per mile PLUS VAT? i.e. £9.00 + VAT. Which then gets paid into company account.

Generally, do you provide a separate invoice for expenses?

I can see how you make a small amount if flat rate registered but its not so cool if client does not pay 45p mile!

My situation is even more complicated in that I am doing a lot of foreign travel for the client. They pay for the air fares and taxi to/from the airport in the UK but I usually end up paying for the hotel (although they book it.) My accountant advise me to add 20% VAT even though the sales tax rate was a lot lower in the foreign ountry (I found it confusing...!) But a key point is that such expenses are effectively classed as 'cost of goods sold' for my ltd co.

I submit one invoice for my month's fees and include the expenses. The agent has a section on my online timesheet to add expenses which the client must 'approve' as well as my days worked.

No one ever asks for any receipt.

[Contreras]

Bit confused about this. OK, so I travel 20 miles to client site and then 20 miles home. So I pay myself 40 x 45p yeh? Job done.

During the day, client wants me to travel to different site and pays me expenses. Say 20 miles. Assuming they're also willing to pay me 45p a mile (although in the past some ain't been so good).

So, instead, I now pay myself 60 x 45p per mile expenses from company account to myself? i.e. £26.00

Um, £27 sounds better.

Then I bill the client 20 x 45p per mile PLUS VAT? i.e. £9.00 + VAT. Which then gets paid into company account.

Give the man a bone.

Generally, do you provide a separate invoice for expenses?

Now you're being silly.

I can see how you make a small amount if flat rate registered but its not so cool if client does not pay 45p mile!

The contract is still making a profit overall, even if the client won't pay the mileage, it's just less profit... but of course it's factored into the negotiated rate.

[TheCyclingProgrammer]

If your client has agreed to reimburse your mileage at 45p a mile, then you should treat that as the net cost and charge VAT. You are billing them for your service, which includes agreed expenses. All liable to VAT.

You also make a claim for the mileage at HMRC approved rates from YourCo, regardless of what you bill the client (which could be anything including zero).

You can invoice expenses separately, or itemised on the same invoice. It doesn't really matter. Out of convenience for your client I would ask them if they have a preference.

Just don't confuse charging a client for expenses and claiming expenses from YourCo. YourCo reimburses you for your out of pocket expenses in accordance with HMRC rules on employee expenses and YourCo invoices the client for its expense (which is the cost of meeting your expense claims plus potentially other expenses YourCo may have incurred directly).

[psychocandy]

Bit confused about this. OK, so I travel 20 miles to client site and then 20 miles home. So I pay myself 40 x 45p yeh? Job done.

During the day, client wants me to travel to different site and pays me expenses. Say 20 miles. Assuming they're also willing to pay me 45p a mile (although in the past some ain't been so good).

So, instead, I now pay myself 60 x 45p per mile expenses from company account to myself? i.e. £27.00

Then I bill the client 20 x 45p per mile PLUS VAT? i.e. £9.00 + VAT. Which then gets paid into company account.

Generally, do you provide a separate invoice for expenses?

I can see how you make a small amount if flat rate registered but its not so cool if client does not pay 45p mile!

[Brett at Nixon Williams]

Hi Tony,

You should charge VAT on the total expenses charged on your invoice to your client, regardless of whether the expense you incurred had VAT charged on it.

If you reclaim the costs from your company this will negate the income and hence save the Corporation Tax.

If however you are registered onto the Flat Rate VAT scheme you will find that you will make a saving due to the VAT charged on the expenses and this will form part of the company profits and be subject to Corporation Tax.

Hope this helps.

Brett

[TonyAJF]

Thankyou for the response. This make sense to me.

[Pondlife]

Mileage: Yes. See HMRC website for the appropriate rate here
Train tix : Depends. If you pay for them out of your own cash/bank account, Yes. If you use Your Cos company debit card, No.

[TonyAJF]

First Post.

Hi,

In this my second contract, I am charging my travel expenses to the client and adding VAT as appropriate on mileage and train tickets. These are being reimbursed to my ltd company by the client. Should I also be claiming these as expenses to myself (employee and director) from my ltd company ? Otherwise I see these expenses coming into the company as income on which a proportion will be subject to corporation tax.

thanks

Tony